Why Buying and Owning Rentals is Always a Good Investment

Owning a rental is always good; you get paid for being the landlord. It's a really profitable slice of the Chicago real estate investment market. This is mainly because of two things; the first being the steady stream of passive income it provides, and the second being the opportunity to get tax write-offs.

Of course, owning a real estate rental in Chicago is not an easy feat. The rewards are potentially huge only if you have a keen eye for details, proper preparation, and a sound Chicago property management company in charge of your property.

Managing rentals on the Chicago real estate scene can be done all by yourself, but like most people you may get overwhelmed over time. At this point, you can use the services of a Chicago property manager, such Lofty Real Estate Chicago.

Investing in rental properties is always a good idea, once you know the things you need to know, which we will be discussing.

Buying Rentals: Need to Know

Of course, when buying rentals in Chicago, you can either do it yourself or you can use a Chicago brokerage company. Asides from this, it is usually a sound policy to calculate your expected cash flow on the rental property before you purchase it. Think of it as a business; no one goes into a business to make a loss.

For you as a rental owner, the cash flow your property generates is your profit, so to say. Because of this, your cash flow should be at least at break-even point, when you factor in your expenses on the property.

Buying a property with an expected cash flow level that is below the amount you’d spend on expenses such as monthly mortgage payments, depreciation, etc, is not a good idea, and  we do not advise it.

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What are the Advantages of Owning a Rental Property?

There are a lot of advantages of buying and owning a rental property over other forms of investment (we won’t compare, don’t worry), and they are;

1. Diversification of Investment Portfolio

Investment, no matter the amount of probable gains, always involves a risk. Because of the inherent risk in the world of Investment, it is unwise to put all your money into one investment portfolio, especially stocks.  An unforeseen switch in the market dynamics and all your money might be gone with the wind. Owning a rental real estate property helps you mitigate greatly against the inherent risk involved with the investment. Once you have done your due diligence, your rental property will always be a source of income for you – one you can rely on to a very great degree.

2. Getting Tax Write-offs

The tax system favors owning rental properties a lot, and that’s another perk of buying and owning a rental property.  Owning a rental property means you don’t get to pay tax on your rental income. Owning a rental property means there will be depreciation and other property related expenses.  It is a usual practice to deduct the depreciation and other expenses from the federal income tax, and so this leaves the rental income completely free of any deductions.

3. Steady Stream of Passive Income

Owning a rental property is one of the safest ways to earn a steady stream of passive income every month. It’s your job (or your property management’s job) to ensure you keep renters who pay their rent promptly.

The “steady” in the income hinges on a lot of factors including doing a background check for prospective renters, so you can easily weed out those with a history of causing trouble for their landlords.

The best part is that you do not have to get involved in the background checks exercise or even get involved in the day to day running of the property before you get your passive income. You can simply leave your property to a Chicago property management company and focus on other areas of your life, whilst they manage the property and ensure your passive income keeps rolling in.

4. The Chance to Sell at a Premium

The usual industry practice is that you should try to hold your rental property for at least 10 years, but that rule doesn’t always work for every situation.

Owning a rental property in an area that increases the value of your property means you can sell off the property and make a gain on it at any time.

Even if the market dynamics change and the prices of property plummet, you can still rent out your property and make a rental income that will cover the costs of owning the property. You can do this till you’re ready to sell, and you would not lose any money.

Also, real estate market values generally appreciate over time, and the real estate market is usually one of the first to bounce back in case of a recession. So, the chances of losing money on your rental property investment over time are very low.

5. Growing Your Equity

Growing your equity is a goal for everyone, and owning a rental is a good way to do this. It is always good practice to purchase a rental property with a mortgage. Once this is done, you’ll have to start paying up on the mortgage payments, and you can use the rental income to pay for your mortgage.

This would be especially easy if you’ve accurately calculated the amount of cash flow to expect from owning the property. It would basically be as though your tenants are paying your mortgage for you, and over time, your debt will shrink and disappear, and your equity will start to rise steadily.

Conclusion

Buying and owning a rental property is one of the best ways to not just earn stable, passive income, but to also grow equity. By understanding and calculating just how much you can expect with regards to cash flow from the property, you can forecast how long it will take you to pay off your mortgage and start growing your equity.

Ready to invest in rental property? Give us a shout to learn more.

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